201k views
1 vote
"what is the present value of $16,000 discounted back 5 years if

the appropriate interest rate is 4.5%, compounded semiannually?
a)12,295.84
b)11,783.51
c)13,320.49
d)13,960.90
e)12,808.16"

User Aysel
by
8.2k points

1 Answer

5 votes

The present value of $16,000 discounted back 5 years at an interest rate of 4.5%, compounded semiannually, is approximately $12,867.25, which isn't listed in the provided options, suggesting a need to check for errors in the question.

To calculate the present value of $16,000 discounted back 5 years at an interest rate of 4.5%, compounded semiannually, you use the present value formula:

PV = FV / (1 + r/n)nt

Where:

Plugging in the values, we get:

PV = $16,000 / (1 + 0.045/2)2*5

Now, calculate the denominator:

1 + 0.045/2 = 1.0225

(1.0225)10 = approximately 1.2434

Finally, divide the future value by this number:

PV = $16,000 / 1.2434 ≈ $12,867.25

Therefore, the present value is approximately $12,867.25, which is not listed among the options given, indicating a possible miscalculation or typo in the question, and thus it is advisable to review the interest rate and the compounding frequency. Always double-check the provided options or consult additional resources to ensure accuracy.

User Dan Caddigan
by
8.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.